The covid-19 pandemic is prompting consumers to keep a tab on their credit scores. There has been a 25% increase in the number of inquiries for credit reports in India in June compared with May 2020, according to the data from online marketplace for financial products BankBazaar.com and credit information company Experian.
North India saw the highest increase in inquiries for credit reports. They were up 31% in June compared with May. South India saw an increase of 28% and the West witnessed a 22% rise.
The covid-19 pandemic has led to pay cuts, job losses and cash flow issues for businesses. Following these, banks, non-banking financial companies (NBFCs) and card issuers have taken steps to reduce risks. There have been tightening of lending policies, asking for a higher credit score, and there has been a reduction in credit limits.
BankBazaar, which gives out free credit score, saw 111% increase in consumers checking their free credit scores in the financial year (FY) 2020.
The platform also saw an increase in contactless credit applications via digital KYC (know your customer). Of the total application for loans on the platform, 41% came from South India. The rest were from the other parts of the country. “As safety becomes paramount, financial institutions predict a 100% growth in digital lending by the end of this year,” Adhil Shetty, CEO, BankBazaar, said in a statement.
Digital KYC is going to be the future, helping borrowers to get quick access to credit. It will also save costs for lenders.
“It will provide cost efficiencies around acquisition as well as automate decision making for lenders. Consumers get timely and seamless access to credit while financial institutions are assured of identity verification and faster processing of loans,” said Sathya Kalyanasundaram, country head and managing director, Experian India.
Metros saw a more aggressive increase in demand for credit. About 21% of applications were from Delhi-NCR, followed by Hyderabad at 16%, which remained in absolute lockdown for a much smaller period.
Mumbai and suburbs as well as Chennai, which are still operating with tighter restrictions, saw a tepid number of applications— 12% and 9%, respectively. Among the non-metros, the highest number of applications were from Coimbatore and Jaipur, followed by Lucknow and Indore.